With governments looking to find ways to both meet defense requirements and cut costs, it appears that the opportunity for creative “hosted payload” type deals has never been better. Can the satellite industry persuade key decision makers within governments/defense forces to make bold steps forward?

The unleashed potential of hosted payload profits in the public sector has always been the top prize of the private sector. Significant investments made in future systems supporting hosted payload business models have placed this technology into an exciting spotlight. But in wake of the Hosted Payload Summit in Washington, D.C. last October, other prizes, possibly more valuable, have unexpectedly revealed themselves. The discussion has shoved satellite technology into the consciousness of high-ranking, influential military officials more so now than ever before. Satellite companies, which have long been frustrated with their limits in forming long-term government plans or shaping federal policy, may have found their champion representative. Even if hosted payloads are not widely adopted by governments, the issue is already taking effect on import and export policy, trade laws and the creation of a space-situational awareness solution.

Inmarsat Government Services president, Rebecca Cowen-Hirsch, like most satellite industry executives in the government sector, knows that hosted payloads are not the end-all, be-all solution for military requirement sets, but rather one important element in a wide range of solutions available in the commercial sector. Cowen-Hirsch understands and acknowledges the interest in hosted payloads, but senses a more difficult challenge in changing the mindset of government officials responsible for executing these strategies.

“The impetus of the conversation in Washington now, more than ever, has been the ability to balance innovative concepts with mission requirements consistent with the budgetary plan. It is essential for the government to be able to look at the whole plot and to understand that mission architectural assessments come into play,” says Cowen-Hirsch. “The government should also consider the budget in terms of where and when it can get out of the business of building its own satellites with decades-old technology. The commercial side can provide innovation much faster and at more affordable rates to improve resiliency.”

Considering these issues, it was only appropriate that the SATELLITE conference group’s recent one-day Hosted Payload Summit kicked off with a keynote address from Gregory Schulte, U.S. deputy assistant secretary of defense ambassador, who asserted the U.S. Department of Defense’s intentions to cooperate with commercial satellite companies in leveraging hosted payload capabilities.

“We are looking to commercial hosted payload developers, providers and operators to help us think of innovative solutions to meet government and military needs,” Schulte said during his remarks. “The U.S. National Space Security Strategy that we put forth on behalf of the administration was our way of saying that we need to change the way we think about developing resilient capabilities in space.”

Procurement Strategies

Schulte stresses the word “resilience” as a focal point of the Pentagon’s efforts to leverage new policy and procurement strategies in working with commercial hosted payload suppliers. “We are placing added emphasis on tackling the congested, contested and competitive aspects of space security by strengthening the resilience of our space architecture. The functional capabilities that hosted payloads provide can no longer be viewed as an experiment,” he says. “Recent examples in orbit, such as the ORS-1 satellite and the [Commercially Hosted Infrared Payload] CHIRP payload onboard SES-2, show that cost over performance should not be the one, defining approach to meeting requirements. Some would say that the United States can’t afford these complex systems, but the defense department would argue that the United States can’t afford to miss out on the security capabilities they deliver.”

Clearly, the U.S. space strategy and corresponding policy are written in such a way that hosted payloads are presented as an obvious choice and path for the government to follow. However, I do think that there is still a gap in the bureaucracy catching up with the policy.

—Andrew Ruszkowski, Xtar vice president of Global Sales

The timing of CHIRP’s launch on SES-2 not only brought much needed government representation to the industry-based table, but also acknowledged the ingredients for a potential recipe to meet military needs within a realistic budget strategy. Doug Loverro, who serves as executive director of the U.S. Space and Missile Systems Center in California, echoes Schulte’s sentiments on international cooperation. “SES-2’s CHIRP hosted payload is the exact definition of international partnership. This is a satellite that was commissioned by a company based in Luxembourg, built by a U.S. manufacturer and launched by a French company from a facility in French Guiana, sharing payload space with a Middle-Eastern satellite,” says Loverro. “The concept and potential of hosted payloads are not new ideas to the government — they’re just not used to them.”

On the commercial side, adjusting to the lag of government and military methods of action also isn’t a new concept. U.S. military procurement procedures and the enactment of policy to support hosted payload and other private-industry space programs have long been areas of confusion for the satellite industry. Complex legal issues and ITAR laws prohibiting the launch of military hosted payloads have added to that confusion.

“Our existing deterrent strategies for space attacks hasn’t changed much from the 1950s,” says Schulte. “We are working on an update to the current National Transportation Policy to give us more access to international allies and partners as options. We think it is in our national security interest to do so as hosted payloads could provide the door to more international cooperation among allies and assist the Pentagon in developing counter-measures against hostile actions in space.” 

New Legislation

In November, the U.S. House of Representatives passed new legislation to reform U.S. satellite export controls, which received a strong endorsement from the Satellite Industry Association (SIA) in a Nov. 2 statement. The “Safeguarding United States Leadership and Security Act of 2011 (H.R. 3288),” introduced Nov. 1, would authorize the President to remove satellites and related components from the U.S. Munitions List that are typically subject to restrictions and Congressional oversight.

SIA president Patricia Cooper says the bill dramatically improves the competitiveness of the U.S. satellite and space industries and ensures innovation. “The SIA and the satellite industry commend the bipartisan co-sponsors of this bill for their leadership in updating an outmoded and overly-restrictive regulation instituted more than a decade ago, which has adversely affected the U.S. space industrial base. We encourage Congress to pass H.R. 3288, both to reinforce our nation’s primacy in space technology and to support American jobs and competitiveness.”

If passed, H.R. 3288 would supersede 1999 legislative provisions that required all commercial satellites, satellite components, associated technical data and related ground equipment to be treated as munitions for export licensing purposes, regardless of their technical sensitivity. The bill was co-sponsored by both Republican and Democratic representatives in Congress.

Both the government’s administrative leadership and Congress have expressed a willingness to support a fundamentally different military acquisition process and the commercial satellite industry is ready to respond to their plans. According to Andrew Ruszkowski, Xtar vice president of Global Sales, now is the time for those responsible for executing these models in the Pentagon to make some difficult decisions in showing that same willingness. “I’m optimistic that people in the industry and in government will seize on this moment,” he says. “Clearly, the U.S. space strategy and corresponding policy are written in such a way that hosted payloads are presented as an obvious choice and path for the government to follow. However, I do think that there is still a gap in the bureaucracy catching up with the policy. That’s frustrating for a lot of people in our industry, including myself, but I don’t think anyone would tell you that they are honestly surprised with that.”

X-band satellite operator Xtar has been making inroads into technology challenges faced with government customers always operating under stringent budget environments. Some of its strategies include developing its fleet to support the needs of current and future military requirements and supporting developments in government hosted payload use.

Ruszkowski says it is going to take concerted will on all levels of government to put the effort into leveraging hosted payload capabilities. “Government leadership will have to spend some political capital into putting supportive policy into action. One of the themes that was spoken about frequently at the Hosted Payload Summit, especially the panel I was on, was that the political leadership is missing — not just in the White House, but in the Pentagon and elsewhere. I agree entirely with that point. Leadership is what’s needed to make hosted payloads more of the norm than the exception.”

But how much longer can the government and military wait to find its leadership with this issue? Ruszkowski believes the momentum has to build and that every CHIRP and Internet Routing in Space (IRIS) payload launched brings legitimacy to the hosted payload model. “These systems prove the case financially and operationally to other potential hosted payload users. When we get the news out that these things have occurred, that’s good for the industry,” he says. 

Tools

On the technical side, the satellite industry has made the tools available for the government to ease into the new economic reality — there are alternatives to expensive government-exclusive space assets and programs. In August, Euroconsult produced a world market survey that showed an estimated 1,145 satellites being built for launch between 2011 and 2020. Approximately 70 percent of this total revenue will be attributed to demand in the government market, says Euroconsult space director and report editor Rachel Villain.

“The government market is worth more than double the commercial market, but is largely closed to non-domestic manufacturers. However, export opportunities for manufacturers exist with governments in countries with no space industry,” says Villain, who adds that the government sector demand will likely remain concentrated in a handful of countries.

Research Figures

Villain’s research shows that 777 satellites will be launched by government agencies from 50 countries, however, more than 80 percent of those satellites will come from the United States, Russia, the European countries, Japan, China and India. The primary reason for this concentration was the fact that established space countries are replacing systems that have already been operational, in addition to launching new satellites, while emerging space powers are only building and launching new systems that are not yet at the stage of replacing existing satellites.

“Defense budget constraints are leading to more public-private partnerships and government payloads hosted on commercial satellites. An even more limited number of countries will launch space surveillance and missile defense satellite systems to be used in combination with ground networks,” says Villain.

Cowen-Hirsch says that the conversation on how hosted payloads serve as the commercial industry’s prime example of what it can provide for the government’s current requirements set has taken place in a wide array of settings. “I just sat in on a panel of U.S. government representatives talking about acquisition and policy as well as the decision making process involving the Defense Space Council. I think that what we are seeing with hosted payloads is a great deal of interest in looking at these platforms as a complement to other aspects of architectures and as a way to roll in new commercial relationships,” Cowen-Hirsch says. “But, there is so much upheaval right now with the current military budget and oversight process, as well as with the program architecture. The discussion has been whether or not the government has the ability to disaggregate requirements and evaluate where hosted payloads fit into the overall solution set in a meaningful fashion — specifically how hosted payloads will differ or complement other relationships with commercial industry.” 

Discussion

There has been progress in moving the hosted payload discussion in the direction of using hosted payloads as one element of a solution set, but all of these other decision-making cycles are in such a spiral that this positive momentum is not necessarily moving forward, says Cowen-Hirsch, who highlights a recently conducted U.S. military resiliency basis study as an important conversation starting point.

“This study guide has been in the works for quite some time. It was created to focus on aggregation questions related to protected communication and the balance between milsatcom and commercial satcom. But the project has lagged for many, many months. That study needs to come out by its deadline in April 2012 and it has to be visible and play into these decision-making cycles in the Pentagon,” Cowen-Hirsch says.

Most satellite executives in the sector agree that the government needs to be able to understand which of its current programs of record are still relevant. This pertains to a variety of different program arenas from Overhead Persistent Infrared (OPIR) capability to positioning and navigation timing on different mission functionalities.

Boeing Space and Intelligence Systems (S&IS) vice president, Jim Simpson, says that when it comes to the apparent relevancy of hosted payloads, the U.S. government has not yet been able to fully utilize the platform’s potential because there aren’t many examples in orbit. But, he also believes that another aspect that has held things up is that the government is trying to understand how the allocations of spectrum would work and how they would be able to manage these activities within their current infrastructure. “Some of the possible ways they could do this would be through some kind of a U.S. General Services Administration (GSA 70) schedule with the U.S. Defense Information Systems Agency (DISA) or a contract through the U.S. Space and Naval Warfare Systems Command (SPAWAR) or some other vehicle,” Simpson says. “I do believe that there are a lot of opportunities that are being worked right now by both sides. We don’t see any real impediment on the government side. We just see that there is a lot of groundwork that needs to be done to be able to enable the government to fully utilize hosted payloads.”

The good news for the satellite industry is that the U.S. government is clearly interested in hosted payloads and is starting to investigate other approaches. “These strategies are relative to either hosted payloads or commercial satellites complementing the existing systems by the notion of DISA’s ASSIST program, which the government is looking at as something that could come into fruition to complement the [Wideband Global Satcom] WGS fleet. While we’re starting to see a real emergence of hosted payloads, we must remember that the technology is currently in an early phase of adoption for the U.S. government,” says Simpson.

But Cowen-Hirsch stresses that the government needs to be able to make some difficult decisions to disaggregate capabilities in favor of something more timely, resilient and affordable. “I am optimistic as all the pieces are in place for this change to occur — the administrative leadership is on board, Congress is looking to do something fundamentally different and the industry is ready to respond. However, I think we are about to arrive at a cataclysmic moment with what is going to happen in the U.S. military’s debt committee,” she says. “Yes, the time is now for innovation, but the difficulty will be whether the status quo mentality of people at the execution level within the government and convince them to operate in the best interest of the warfighter and the taxpayer. That’s a hard nut to crack.”